Partnership Taxation in The United States - Determination of Distributive Share

Determination of Distributive Share

A partner's distributive share of the partnership's income or loss, and its deductions and credits, is determined by the partnership agreement. However, the partner's distributive share is measured by their partnership interest if the partnership agreement does not provide for such a distributive share, or the allocation under the partnership agreement does not have substantial economic effect. The partnership interest can be discerned through an analysis of the capital accounts of the partners to determine in what proportion to the rest of the partnership each partner contributed capital to the partnership.